Every Contract a Franchise Needs in the UK (2025)
Last updated: February 2025
Legal Requirements for a Franchise
The UK has no franchise-specific legislation, unlike the US or EU. Franchise relationships are governed by general contract law, the Consumer Rights Act 2015, competition law (the Competition Act 1998), and the British Franchise Association (BFA) voluntary code of ethics. The BFA code requires full pre-contractual disclosure at least 14 days before signing. Franchise agreements must also comply with the Unfair Contract Terms Act 1977 and the Equality Act 2010.
Essential Contracts
The core legal document governing the entire franchise relationship, including territory, fees, obligations, brand usage, and termination rights
Franchisees must acknowledge receipt and agreement to follow the franchisor's operations manual, which typically forms part of the franchise agreement
Most franchise locations require premises — the lease structure (direct or sublease from franchisor) has major financial implications
Franchise businesses with staff must comply with the Employment Rights Act 1996 and provide written terms from day one
Recommended Contracts
While not legally required in the UK, BFA members must provide this and it protects both parties from misrepresentation claims
Franchisors often require directors of franchisee companies to give personal guarantees — understanding the terms is critical
Documents approved supplier arrangements, particularly where the franchise agreement mandates purchasing from specific suppliers
Common Legal Risks for a Franchise
- Signing a franchise agreement without independent legal advice and being locked into unfavourable terms for 5-10 years
- Territory encroachment by the franchisor or other franchisees without clearly defined exclusive territory rights
- Personal guarantees exposing the franchisee's personal assets beyond the business
- Restrictive post-termination covenants preventing the franchisee from operating in the same industry
- Hidden costs not covered in the franchise disclosure, such as mandatory refurbishment or marketing levies
Industry-Specific Notes
The British Franchise Association provides a voluntary code of ethics but membership is not compulsory. Prospective franchisees should always seek specialist franchise solicitor advice before signing. The competition law implications of exclusive territory arrangements and minimum pricing should be carefully reviewed against the Competition Act 1998.
FAQ
Is there a cooling-off period for franchise agreements in the UK?
No. Unlike consumer contracts, there is no statutory cooling-off period for franchise agreements in the UK. Once you sign, you are legally bound. The BFA code of ethics recommends a 14-day disclosure period before signing, but this is voluntary and only applies to BFA members. This is why independent legal review before signing is absolutely essential.
Can a franchisor change the franchise agreement terms after signing?
Generally, a franchisor cannot unilaterally change the terms of a signed franchise agreement. However, many franchise agreements allow the franchisor to update the operations manual, which can effectively change operational requirements. The franchise agreement should specify what changes the franchisor can make and what requires mutual consent. Any changes must comply with the Unfair Contract Terms Act 1977.
What should a franchisee look for in the territory clause?
The territory clause should define the exact geographical boundaries, specify whether it is exclusive or non-exclusive, state whether the franchisor can operate or grant other franchises within the territory, and address online sales within the territory. Be wary of 'best efforts' territory protections — insist on contractually exclusive territory rights with clear remedies for encroachment.
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